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A.J.
A.J., Attorney
Category: Bankruptcy Law
Satisfied Customers: 4268
Experience:  Experienced consumer bankruptcy attorney.
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I have been told that I need to declare bankruptcy. I went

Customer Question

I have been told that I need to declare bankruptcy. I went through a divorce, and got to a point where I couldn't pay my bills anymore. Because of this, I have horrible credit. 15+ write offs, including $22K credit card debt, Short sold house for $22K short---bank forgave short sale. etc. etc.

I am now in a position where I am starting to recover. I am current on all my current bills---rent, power, etc. I am making more money and I inherited some money.

My credit problems (defaulting on loans, bills) started in 2010. Most of my write offs/charge offs were during 2011 and 2012.

How do I determine when it makes sense to declare bankruptcy? No creditors or collection agencies are calling me---I think they gave up. I thought that after 7 years, all of the write offs would go away?

Ok, here is my main question. My car died a week ago and I have been bumming rides from friends. I want to buy a new car---I got approval for the loan. Is it a bad idea for me to take $15,000 from CD's I inheritied that are not in my name. (they are in my Dad's because he's the administrator of the will) and buy a new car. I would be getting a loan for $12,000 + $15,000 from the CD's for a total of $27,000. Isn't this a good way to build my credit back up...paying the loan off over the next 5 years.

Or, can all the old creditors still come after me and take the new car---I would use it for work---I am in sales and travel almost every day
Submitted: 11 months ago.
Category: Bankruptcy Law
Expert:  A.J. replied 11 months ago.

A.J. :

Hello, and thank you for contacting Just Answer. My name isXXXXX am a bankruptcy law professional, and I look forward to answering your question this afternoon.

A.J. :

I am certainly sorry to hear that you are in a tight situation financially. Here are a few thoughts:

A.J. :

(1) Just because a debt has been "Written off" doesn't mean the creditor cannot still pursue the debt, particularly in a lawsuit. Sometimes suits will appear out of nowhere on a debt that is a few years old, and sometimes a collection agency will try to collect first. Bankruptcy does eliminate this possibility, of having debts come back to haunt you as they get discharged in bankruptcy.

A.J. :

(2) It is probably not a good idea to take out a large loan just before filing for bankruptcy, because technically that loan would also be discharged, and that could lead to the bankruptcy trustee moving to have the bankruptcy dismissed for fraud.

A.J. :

(3) Often people will wait to file for bankruptcy until a creditor has sued, or multiple creditors have become so aggressive that the debtor cannot take it anymore. This is generally perfectly fine, but the problem in a situation such as the one that you describe is that if you were to file too soon after taking out a new loan for a car, bankruptcy fraud could be a problem.

A.J. :

(4) Even were you to file for bankruptcy tomorrow, the bankruptcy trustee has up to 180 days after the case is closed to seize any inheritance that you receive post-bankruptcy.

A.J. :

(5) If a creditor sues and gets a judgment, they can try to seize and sell a vehicle, particularly a new vehicle with a lot of value, but only if there is equity in the car. A debtor gets to protect up to $3500 of equity in a vehicle, but anything outside of that and a creditor can attempt to seize it and sell the vehicle to recover some of the debt (if they first sue and win a judgment against you).

A.J. :

The prudent thing to do might be to take money inherited, pay off the old debt if possible, and then purchase a less expensive vehicle based on the amount you can borrow and anything left from an inheritance. That would eliminate the risk from old creditors suing over a debt, and avoid having to deal with having just purchased an expensive vehicle right before bankruptcy.

A.J. :

One other option would be to try a chapter 13 bankruptcy, which is a court-sanctioned repayment plan rather than completely wiping out old debt. This would still stop creditors from suing (because you would be paying them back through the court's payment plan), and would also make sure that there was no risk to a newly purchased vehicle.

A.J. :

Ultimately, because there are so many moving parts here, the best course of action would be to actually sit down with a bankruptcy attorney in person and in confidence to review the old debts, and determine whether or not they still pose a risk.

A.J. :

If, for example, certain debts (such as credit card debts) are more than 3 years old, and no payments have been made, the statute of limitations may have passed and the creditor can no longer pursue you in court, making bankruptcy less necessary.

A.J. :

Reviewing each debt for things like a statute of limitations passing with a bankruptcy attorney in person is arguably the prudent course in your situation, just because there are so many things to be addressed (ie this is not just a simple no-asset bankruptcy you are talking about). Often attorneys will provide at least an initial consultation for free (or for a limited cost).

A.J. :

Should you decide to consult with an attorney in person, the North Carolina State Bar Association has a referral service available at:

A.J. :

1-800-662-7660


1-800-662-7660
1-800-662-7660

A.J. :

or online at:

A.J. :

https://www.ncbar.org/public-pro-bono/lawyer-referral-service/nc-find-a-lawyer

A.J. :

I hope this helps, and let me know if you have any additional questions or need clarification of anything I have said (never be afraid to ask for clarification!). Otherwise, please remember to RATE my answer so that I can receive credit for my work.

Customer:

Ok, that makes sense---sitting down with a bankruptcy attorney in person. I appreciate the help. Do you think $12,000 for the loan on the car is "large"? I am putting down $15,000 from inherited CD's. Its a 2006 Dodge Charge with 46,000 miles...probably not prudent, but I need to buy a car. My situation has changed (making more money, and inheriting some money)

A.J. :

It is likely large enough to get a bankruptcy trustee or court's attention, certainly. The issue, as I said before, could be that lets say you take out the loan tomorrow and then file for bankruptcy the next day. At least in a chapter 7 (complete discharge of the debt), the new loan would be included whether you wanted to pay it or not. A debt taken out that close to a bankruptcy filing gives the appearance of fraud, which can at least cause problems with a bankruptcy filing and at worse get the bankruptcy case dismissed or the debtor levied with sanctions (although that is uncommon).

A.J. :

I can certainly understand the need to purchase a car for work, that is why it would be smart to sit down with a bankruptcy attorney in person. It may be that, based on your debts, you can wait long enough before filing for bankruptcy that the presumption of fraud would not be raised, particularly if none of your creditors are currently aggressively attempting to collect (particularly in the form of a lawsuit).

A.J. :

It may be that, based on the age and amount of your old debts, bankruptcy will not be necessary, or that a chapter 13 would be a better option, both of which protect a new car and avoid the issue of bankruptcy fraud.

A.J. :

Ultimately, that decision cannot be made in a forum like this (informational only and public) and should be made in consultation with an attorney in person.

A.J. :

Let me know if you require any additional information, I am happy to keep chatting. Otherwise, please remember to RATE my answer so that I can receive credit for my work.

Customer:

My girlfriend, who used to work for a debt consolidation company says that Wells Fargo can't come after my $20,000 credit card debt, because it has been sold off to other companies and Wells is no longer involved...what do you think?

Customer:

How is it possible to pay back a debt that has already been written off by the bank...the $20K of credit card debt with Wells Fargo for example. And, if I pay it back, does it disappear from my credit record? I will consult with a bankruptcy attorney in person...I appreciate your guidance

A.J. :

It is true that if an original creditor has sold a debt to someone else, then the original creditor cannot pursue the debt unless they were to recall it or buy it back (Depending on the terms, sometimes debt collection companies are assigned debts for a fee, sometimes they buy the right to collect outright). However, just because the original creditor can no longer pursue the debt doesn't stop the new "owner" of the debt from pursuing you. So long as the statute of limitations has not passed, whoever holds the debt can still take legal action, up to and including a law suit. Only the statute of limitations passing, or a bankruptcy, can prevent that.

A.J. :

As for "Written-off" debt, that unfortunately is a term that has become commonly misunderstood. Writing off the debt is generally a tax term, and does not prevent a creditor from later pursing the debt (although if they do so they sometimes lose the tax advantage of writing it off). A "written-off" debt can still be pursued by a creditor or debt-buyer until the statute of limitations for legal action has passed.

A.J. :

If the debt is paid back it should start showing on a credit report as paid (although it would also likely still show as late). If the debt is paid through a bankruptcy then the debt should also be showed as resolved through the bankruptcy.

A.J. :

I am not necessarily encouraging you to pay old debt, that would be something you should determine in consultation with a bankruptcy law attorney in person. What I am saying is that, until a statute of limitations passes preventing lawsuit, a creditor (or a debt-buyer if the debt has been sold) can still take legal action to try and collect on a debt, even if it has been "written-off."

A.J. :

I hope this helps further, and let me know if you require any additional information or clarification. Otherwise, please remember to RATE my answer so that I can receive credit for my work.

Customer:

Thanks, XXXXX XXXXX rating you Excellent and adding a tip. You have done a great job answering my questions.

A.J., Attorney
Category: Bankruptcy Law
Satisfied Customers: 4268
Experience: Experienced consumer bankruptcy attorney.
A.J. and other Bankruptcy Law Specialists are ready to help you

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